Investors Are Bearish on Bonds

William H. Gross has dumped all Treasuries from the world's biggest mutual fund. Other bond market investors are moving money to non-US bonds, real estate, commodities, and even a wind farm in Brazil as they prepare for an end to the three-decade rally in Treasury securities. The worry is that unprecedented spending by the US government and the Federal Reserve will inevitably cause interest rates to rise, reducing the value of existing Treasury securities. The 10-year Treasury yield, which reached a high of 15.8% in Sep 1981, fell to as low as 2.05% on Dec 30, 2008. Insurers, whose flexibility to invest in different assets is limited by regulators, are buying bonds with shorter maturities to protect their investments from rising interest rates.